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The Wise Exit is an open dialogue with fellow founders and former business owners sharing real stories and offering honest advice around selling their companies to some of the top acquirers in the world.
Beyond the entertaining and educational exit stories, host and M&A Advisor, Todd Sullivan is here to help demystify the Mergers & Acquisitions (M&A) process. For example:
- How much is my business worth?
- What is Net Working Capital?
- When should I get a Quality of Earnings analysis
- Should I hire an Investment Banker, M&A Advisor, or Business Broker?
- When do I talk to my Key Employees about a possible transaction?
We hope you enjoy... and learn a few things along the way!
Cashing Out Podcast | E23 | Andy Beal
Todd Sullivan:
Welcome to the Cashing Out podcast, where our fellow founders share real stories and offer honest advice around selling their companies to some of the top acquirers in the world. My name is Todd Sullivan, CEO of Exitwise, where we help business owners create the exits they deserve.
Today, I have a special guest, good friend, and founder of MaxPreps, Andy Beal. In 2002, Andy launched MaxPreps which became one of America's top sports media properties, and it was the pre-eminent online source for high school schedules, scores, statistics, and video highlights. In 2007, Andy made the decision to sell MaxPreps to CBS Interactive for $43M. Andy stayed on with MaxPreps serving as its President for the next 13 years until he left CBS in 2020.
In today's conversation Andy and I talk about the debate over selling MaxPreps instead of raising more capital, and how having a great Board of Directors can help set you up for a really successful exit. I hope you enjoy my conversation with Andy Beal.
Todd Sullivan
Andy, thank you for being here. Very excited to have you. Right. We've been friends for a while, certainly business colleagues. Our partnership was instrumental in helping build one of my companies. And I'm just thrilled to get you on because, you know, Maxpreps, there's so many people there, millions of people certainly, that have seen the site, right? Yet millions of impressions a month.
00:00:22:22 - 00:00:35:06
Todd Sullivan
But people know the brand and they relied on it for so long. Really iconic sports site and as sports guys right. It was very meaningful to know it as a consumer but also as a business partner. So thank you so much for being here.
00:00:36:00 - 00:00:42:23
Andy Beal
It's my pleasure to be here. And y'all talking about Maxpreps is something that I enjoy doing, so I know that I'm going to have an enjoyable conversation.
00:00:43:14 - 00:00:51:10
Todd Sullivan
That's great and I guess I have to throw in there. When you took this time slot, I had no problem bumping Mark Cuban from there, so thank you.
00:00:52:00 - 00:00:54:01
Andy Beal
Yeah, right.
00:00:55:19 - 00:00:58:13
Todd Sullivan
What would you have said if I said I bumped Garth Brooks?
00:01:01:23 - 00:01:08:10
Andy Beal
Why don't we do this together? I would probably talk about Garth Brooks.
00:01:08:10 - 00:01:28:19
Todd Sullivan
Yeah. Yeah. Well, why don't we when we jump in and. And I think a good place to start, really, like, is your beginning, you know? How did you. Well, why don't we go back to, like, how did you start entrepreneurship? Because Maxpreps not the only business that you built and sold. So maybe you can kind of take me back some early influences, you know, what got you into this.
00:01:29:02 - 00:02:09:13
Andy Beal
Struggle, You know, going way back. Growing up in Southern California, my dad was a high school teacher and a coach I had the pleasure of, you know, watching him on the sidelines with, you know, athletes that emerged. You know, at his high school, John Elway being the most prominent. And you'll remember him coming home from the first practice, what always showed up as a hit at the time, those three year high schools in Los Angeles as a sophomore and my dad coming home and said, we've got a kid that's going to be in the NFL and I tried to do I tried to debate him on that point.
00:02:09:13 - 00:02:53:15
Andy Beal
Send the quarterback and Canoga Park High School. It's going to be better than it. He was talking about his son. You don't talk, but at any rate, went to college at Cal State Northridge initially and then transferred to the Sacramento State, met my bride, and we stayed here to basically raise our family. I studied political science in school as soon as I came out of school, I ran for my first office, won a local town council seat, and discovered very, very quickly that I actually hated politics and public administration and decided to follow some advice my daddy gave me years earlier, which is, Son, you need to go into sales.
00:02:54:02 - 00:03:28:07
Andy Beal
Yeah. So technology sales had some success with that. I was exposed to technology as a result of that and in 1992, now I quit my job to found my business. And you know, looking back on on what that business concept was, it's laughable. But, you know, essentially, I in 1992 was really kind of pre-internet that I had this notion that we could basically build a fax delivery network for consumers to basically, you know, order documents and have them delivered to their house.
00:03:28:07 - 00:03:49:09
Andy Beal
So as an example, you'd be listening to talk radio show and the host would say, Hey, I wish you could read this article, The New York Times, or how could I do that? It's sitting inside California. And so I thought, well, why don't we just, you know, work out a way to deliver that kind of content port of other media, particularly radio.
00:03:49:15 - 00:04:12:00
Andy Beal
And that's what that was the concept that started my entrepreneurial journey. That's pretty hard. You know, you use the term serial entrepreneur. I'm a serial entrepreneur within this, within the scope of a single business. So I started my business in 1992, went through a variety of different business plans, had some level of success and some levels of failure along the way.
00:04:12:06 - 00:04:20:19
Andy Beal
But, you know, never abandoned that corporation that I started in the beginning and was able to basically morph into what eventually became Maxpreps.
00:04:21:05 - 00:04:48:16
Todd Sullivan
Yeah, that's a great beginning, right? Certainly my dad had some serious influence over my career, so I love hearing that. But the kind of pivot into maxpreps you out of business, right, was revolutionary at the time, you know, distributing that kind of content via fax on demand. And then you went through the kind of the dot com bubble bust it and were able to buy a couple of companies to write to, to find the eventual path.
00:04:49:09 - 00:05:34:15
Andy Beal
Yeah. So, you know, after we recognized the 1996, we recognized that the fax stuff was really not the answer. We pivoted to the web and we did have clients primarily did paper and radio syndicated radio programing as our clients. And we moved into started to develop websites and tools for them. The newspaper business was the bigger part of our business, and we saw opportunities to play with bubble bursting back in 2000 2001 to acquire some companies, particularly intellectual property and client lists of companies that had done a good job and basically building solutions for the newspaper business.
00:05:34:22 - 00:05:57:15
Andy Beal
One of those companies was a company called Sports Huddle out of Saint Louis High Art Sports Hall, with the idea that we were going to distribute their software into newspapers for sports departments to help them with their high school sports coverage. Very manual process. And the way high school sports was covered by newspapers and we were wanting to bring them into the 21st century.
00:05:58:03 - 00:06:20:12
Andy Beal
And I don't know if we were ahead of our time or just things didn't work out quite as we thought in terms of how we would market this. But that acquisition of sports huddle was almost broke the company, but it also caused us to pivot in a way that caused us to focus exclusively on the high school sports market, which was perhaps not coincidentally, something I was very interested in at the time.
00:06:20:12 - 00:06:41:13
Andy Beal
My my sons were at high school age. I was coaching basketball at the local high school as well. So I thought, well, you know, with what I know about high school sports, with what my dad taught me about what coaches and teachers want and how they're motivated, perhaps gives me some insights and provides me with an opportunity to do something special minus school sports events.
00:06:42:02 - 00:06:58:01
Andy Beal
So we pivoted, you know, selling software to newspapers and changing the instead changing the business model to essentially building a brand and and game distribution nationally and creating a media model around that content that we were aggregating in the school space.
00:06:58:16 - 00:07:19:18
Todd Sullivan
That's awesome. I think for for a lot of listeners that pivot, I think it's probably important to point out, right. You had a business that was economically viable, right? You you were funding the growth of the kind of this new venture through revenues of the old business. Correct. And then you then you kind of sold part of that to continue the growth.
00:07:19:18 - 00:07:43:19
Andy Beal
Yeah, Yeah. We, we used all of our capital however with the acquisition of the sports hall product and when that did not perform, you know, we had to sell the other portions of the business. And there's a story behind that actually was prepared to sell the entire enterprise to one of the large national publishers, newspaper publishers in the country.
00:07:44:09 - 00:08:04:13
Andy Beal
And, you know, we had come to terms around the acquisition. I was going to basically be able to get sufficient cash to satisfy that the the outstanding obligations of the business and walk away, you know, with my tail tucked between my legs for half. But my head still kind of held high as we taking care of what needed to be.
00:08:04:13 - 00:08:29:06
Andy Beal
Take care. Yeah. And at the last moment, you know, the publisher said they weren't interested in high school product, but they didn't renegotiate the terms of the deal otherwise. And so rather than getting the cash again from the sale, the assets and then, you know, essentially liquidating the business that gave us a lease on life and allowed us to use our capital to invest in the development of what became Maxpreps.
00:08:29:06 - 00:08:45:20
Todd Sullivan
Andy that's great. I love that. I think it's easy to go back and tell these stories of how these companies begin. But, you know, when people are listening and they're thinking about starting companies, even, you know, well before the exit, right. How to get these things off the ground, there's always a unique story behind it. So that's fantastic.
00:08:46:05 - 00:09:01:09
Todd Sullivan
You got the the economic side and you got the asset that became Maxpreps or at least the beginnings of it. That's fantastic. All right. So you started building Maxpreps, right? So you're testing a new thesis that isn't quite sports. Hudl Right. Can you talk me through that a little bit?
00:09:01:21 - 00:09:36:01
Andy Beal
Yeah. So the idea was, you know, traditional with newspapers. The way that got reported was after each game coach would call the newspaper, they'd have clerks on until about midnight each night collecting the game information that then could be published in the newspaper and incidentally, also published online in some form or fashion. And what we wanted to do was, you know, help newspapers change that to make it more of an online activity for coaches so they could log in and report this stuff and make it more efficient for newspapers.
00:09:36:01 - 00:09:58:22
Andy Beal
Well, it turns out they weren't really interested in that. So we said, Well, let's just do that ourselves. And so we started in the Sacramento marketplace and we had a target of 55 high schools that we wanted to have participate with us. And participation for us was having coaches in or their schedule or their roster. And after each game, you know, report the game stats and results.
00:09:59:16 - 00:10:25:12
Andy Beal
And we we had hoped the coaches would embrace this idea. We thought that we were delivering some value back to them with respect to helping them promote their team in the local marketplace. It wasn't in our market in Sacramento and this like this in every part of the country. There are a handful of teams that are dominant each year or schools that are dominant each year in the newspapers, and coverage tends to follow those dominant teams.
00:10:25:22 - 00:10:49:12
Andy Beal
And what we sold coaches on was the idea was, here's a common platform. Your kids can get promoted equally with this with anybody. You know, we were fortunate. The Sacramento area coaches embraced that idea. So I went to bed after the first Friday night of high school football in 2002, woke up the next morning and found that 35 out of those 55 high schools had already reported.
00:10:49:19 - 00:10:53:13
Andy Beal
And I was doing a happy dance that I can.
00:10:53:13 - 00:10:54:11
Todd Sullivan
That's fantastic.
00:10:55:04 - 00:11:20:04
Andy Beal
I can still picture myself doing within a few weeks, You know, 53 out of 55 schools were were reporting. Two schools never did they have a combined record that year in football or one in 19. So they were just how it works. I'm going to let alone reported stats. So now the Sacramento area coach was somebody that I am eternally grateful for, for proving out the model.
00:11:20:04 - 00:11:43:16
Andy Beal
So I was one half the model which was can we get the content? And he did it. Submitted by the coaches in the second half was would people actually come to the website and could we create a media model that would make sense? And fortunately, I would prove both sides of that model. In year one, an idea was kind of the proof points we needed to go out and raise sufficient capital to to grow the business beyond stock markets.
00:11:44:08 - 00:12:04:22
Todd Sullivan
That's fantastic. So you got found clear product market fit, right? 53 out of 55 schools want to want to use that solution and disintermediate the the previous way of of reporting. Right. That's fantastic. Now I know there's a great story rate of how you named Maxpreps, but what was the name of the company at that point? What did you call it?
00:12:05:13 - 00:12:35:20
Andy Beal
The corporate end was which the product name that we all launched with was SAC preps for Sacramento. Yes. Yeah. Yeah. So then I did buy another small publisher that was doing a high school sports up and then far northern reaches of California, a north of Sacramento, the border. And recognizing as well that we're moving into Southern California through a partnership that we had developed and in Southern California as well, I needed to come up with the name other than SAC preps.
00:12:35:20 - 00:13:02:13
Andy Beal
And so I just closed the deal with the publisher. Northern California is driving back from their offices and stopped in a little town called Yuba City, which is a small town in Northern California. But they were big enough to have a red Robin restaurant, and I stopped in four and had lunch and a milkshake. And as I was sucking on my milkshake, I was trying to figure out a name.
00:13:02:13 - 00:13:18:06
Andy Beal
I was right on the yellow sheet of paper and I was just writing name staff. What are we going to call ourselves? Looked out the window at Red Robin, the Big Macs, a T, J Macs and an Auto, Macs, all in view Macs that my work. Oh.
00:13:20:12 - 00:13:29:10
Todd Sullivan
That's great. No, no. Big team brainstorming session. Just a milkshake at a what was it, A red Robin Hood, you called it.
00:13:30:08 - 00:13:38:15
Andy Beal
And you came back that day and basically told my small team that that's what we were going to name the company and then started working out logos.
00:13:39:00 - 00:13:53:17
Todd Sullivan
Okay, so you went acquire another audience or another territory, right? You know, you're expanding, but still you're not out of the woods. You found local product market fit. At what point did you know This is really we're off to the races. Maxpreps is going to be successful.
00:13:55:04 - 00:14:22:15
Andy Beal
Well, trouble from story boy I'll I'll I'll try to narrow down to why so the Sacramento Bee has been know in the business of chronicling high school sports for probably some 80 years. They're a newspaper in Sacramento and we launched in September. And you know, we started the you'll notice that the Sacramento Bee reporters out of games started to be not so nice to us and whatnot.
00:14:22:15 - 00:14:48:05
Andy Beal
And we were clearly impacting their ability to collect, you know, the type of information they wanted. Post-Game coaches were calling in as much. And I get a call from the publisher of the Sacramento Bee, and he just invited me down to his office and I really didn't know what to expect. I thought maybe they were going to try to accuse me of something or or something bigger.
00:14:48:06 - 00:15:10:16
Andy Beal
I'd get into his office and he's got sports editor and its executive editor and a couple other people, from the Sacramento Bee there. And he starts me this way, says Andy, how long you've been collecting high school sports stats and doing preps, and that's about three months. And he turns to his guys. And how long were you been doing?
00:15:10:21 - 00:15:39:13
Andy Beal
About seven years back then he goes, this guy's kicking our asses. I figured he said, I sack reps. Kicking the sack knees asked them. He said, he goes, I suggest you figure out how to work with him so that was pretty special moment. You know, I don't know if that told me that we were going to make it nationally, but it told me that we were clearly able to do that disintermediation process, at least in Sacramento.
00:15:39:21 - 00:16:07:09
Andy Beal
And it gave me, you know, the confidence that we should probably do it elsewhere in Sacramento was, you know, a great test market generally in terms of, you know, companies like to do test marketing in this particular market. And so being able to utilize Sacramento as the test and demonstrate that we could aggregate audience disagree at the newspaper, get coaches to trust us, gave us confidence to move into other markets.
00:16:07:09 - 00:16:24:10
Andy Beal
And so we grew sequentially from there. You know, the next year we did all of California from and then then the West Coast and then we leased across the country and did a deal with the MSG Network in New York to cover the New York Tri-State Market. And then we filled in the country over the next couple of years.
00:16:24:15 - 00:16:27:01
Andy Beal
So we were pretty ubiquitous by 2005.
00:16:27:10 - 00:16:46:06
Todd Sullivan
Oh, that's fantastic. Yeah. All right. So what I love to get into kind of the exit side of this, right? So you've built something that is has clear value. I'm sure you're you're loving the journey. Certainly. I know some of the employees. You must be having a great time with the people, the team that you built. But at some point you decide to sell the business.
00:16:46:06 - 00:16:50:05
Todd Sullivan
What was what was the trigger there? What was the thinking that went into It's time to sell?
00:16:51:05 - 00:17:14:03
Andy Beal
Yeah. So, you know, doing what we were doing on the capital that we had was something that and the way that we were raising money. And because I had the corporation that I founded in 1992 alive and brought some investors along for the ride into this Maxpreps journey, I had investors that had been in the company for ten years, which is quite a long time.
00:17:14:14 - 00:17:35:22
Andy Beal
And and I had, you know, frankly, quite a few of them. And, you know, raising yet another round would have been pretty dilutive to myself and others. And now it was really, you know, we were not cash flow positive. We were we were clearly had a great trajectory in terms of audience included and sponsor growth and things along that line.
00:17:36:06 - 00:18:04:18
Andy Beal
But we were going to either have to raise another round or we were going to have to consider an exit. And, you know, this was something that was a bit contentious on the board of directors. But clearly, you know, in my mind, if we could find the right buyer, it was time to consider that. And we're fortunate in that high school sports at the time were hot in terms of the perception of major sports media.
00:18:04:18 - 00:18:37:17
Andy Beal
Know this is the time when regional sports networks are getting fired up around the country. Colleges were create collegiate conferences were creating their own media properties, and that people naturally thought that high school was the next big thing. And so we were well-positioned there. And we had ESPN and Fox, CBS Sports, NBC and others, you know, knocking on our door to investigate what we we're doing and whether or not we were interested in either strategic partnership or or potential of an exit event.
00:18:37:17 - 00:18:43:17
Andy Beal
And CBS was very aggressive in pursuing us. And yeah, so it's kind of, you know, how we got there.
00:18:43:17 - 00:19:03:02
Todd Sullivan
Yeah, that's great. I think, you know, we run into a lot of business owners, founders, that one. They do have investors, right? And when you take on investment, you're now on a clock, right? You're your job is to deliver a return on that investment. And so getting that done within a reasonable period of time certainly has got to meet some expectation.
00:19:03:02 - 00:19:26:18
Todd Sullivan
And and I guess the second part of that, what we see a lot of is founders come to us with this decision of like, do I raise money or do I sell a business? And, you know, I think a lot of us as founders have faced that. And, you know, you got to face certainly dilution. But what are those new hurdles that you have to hit to make your equity as valuable or more valuable?
00:19:26:18 - 00:19:44:22
Todd Sullivan
And you take on, you know, potentially a lot of risk to do that. So it's fantastic that you take a moment, talk to the board and say, you know, where do we stand? Can we provide the right return today to investors who have been here, you know, for a long period of time? So that's really responsible. And I know everybody doesn't agree on that.
00:19:45:12 - 00:20:06:20
Todd Sullivan
A lot of times investors that we see want to kind of double down. They want to keep throwing dollars in and because they're looking for their unicorn, they're not trying to hit singles, doubles, you know, home runs like entrepreneurs are. So sometimes that can, you know, have have some conflict. So. Right. So you're also getting inbound interest at the same time.
00:20:07:01 - 00:20:11:18
Todd Sullivan
So as you're having these discussions by by some of these big media companies.
00:20:12:07 - 00:20:35:06
Andy Beal
It may be fair to say that the inbound interest proceeded, you know, our notion that it was time to sell. But it as a result of the inbound interest, it caused us to reflect on, well, what are we what do we do and what's the time timelines on raising the next round? And does it make sense to potentially pull the trigger on an exit now?
00:20:36:00 - 00:20:54:10
Andy Beal
And yeah, so, you know, hit, you know, kind of a funny story, get a call from a you know, a New York based attorney just to say that they just wanted to meet us. Had no idea really Why? Yeah, we were going to I was spending quite a bit of time back in New York on the MSG stuff.
00:20:54:10 - 00:21:23:14
Andy Beal
Anyway, so we agreed to meet and, you know, it was clear that they were fishing on behalf of somebody around, you know, potential acquisitions. Sure. That that potential acquirer that had engaged this firm was CBS. And of course, shortly thereafter, I got a phone call. I didn't know it was CBS, but came to learn later that it was. I got a phone call from a gentleman named Joe Anello.
00:21:23:14 - 00:21:52:21
Andy Beal
And Joe ran corporate development for CBS. He called me at home and identified himself and said, Hi, I'm joined along with with CBS and we want to buy your business. Well, yes. And I and I thought, who's this guy? Really? Which one? Their friends put them like that. But to be sure enough, it was the real deal. And Joe, interestingly enough, eventually became the CEO of CBS Corporation.
00:21:53:00 - 00:21:57:23
Andy Beal
And but he was the guy that ran the process for CBS to acquire Maxpreps.
00:21:57:23 - 00:22:17:10
Todd Sullivan
That's fantastic. Now, all right. So so you got the inbound interest. You kind of got all the stakeholders, their mind set that this should be a possibility. We need to at least explore this. Now, you're not going off and doing this on your own, right? You put an M&A team around you. Can you talk to me about that, that process?
00:22:17:10 - 00:22:25:03
Todd Sullivan
Because, you know, for us, founders need to know, right? This is a level of expertise that you really need on your side.
00:22:25:15 - 00:22:53:03
Andy Beal
Yeah. So, you know, our initial money was, yeah, that money that came from the sale of the assets. And then we had an investor that was a big believer in the business. His name's Lee Reese and Charlie, grateful to Lee for his belief in funding the businesses. We were getting it off the ground. Then we did an A round with Draper Fisher, one of their affiliated funds, and then we did a B round out of New York and a company called Dolphin Equity.
00:22:53:18 - 00:23:39:10
Andy Beal
And the lead on that was a guy named Salvatore Tirabassi and Sal joined our board of directors. And Sal Sal was critical to the preparation for the process and then the process itself. So having a great board member that's a professional investor was very, very helpful to us. First off, before we were, we knew we were in the wanting to be acquired, you know, just getting all, all the corporate matters buttoned up so that when it when we did come to a time when it was your time to consider a sale, all our documentation was was clean all the board minutes were you know, well, well done, the dashboards were, you know, well constructed,
00:23:39:10 - 00:24:02:10
Andy Beal
informative, you know, just a number of things that, you know, while we were busy running around, you know, trying to engage coaches and audience on a day to day basis, these were things that can sometimes slip through the cracks, so to speak. Sure. Here that they are actually appropriately dealt with and managed properly is important when it comes to the exit process.
00:24:03:02 - 00:24:28:16
Andy Beal
So then Sal also recommended that we, you know, interview investment banking firms. And so we did a bake off in New York. We had about eight firms come in over the course of two or three days, you know, basically sharing with us their industry specific which the media, media industries, the deal points how they thought they could get the valuation for the company that the board was seeking.
00:24:28:16 - 00:24:50:03
Andy Beal
And ultimately we we selected Jeffries to help us. And it we engaged Jefferies as our investment banker to basically run the process for us. And while you recognize that you're you're going to pay your investment banker, you know, not an insubstantial sum of money, it was reasonably worth it.
00:24:50:17 - 00:25:22:05
Todd Sullivan
Yeah. Andy, that I love hearing that, that, you know, you had a really experienced board member, right, who had likely been through M&A before there, also an investor there aligned with getting you the best outcome and that you you know, not only are you putting the company in in really good presentation order, I know we spent a lot of time with companies getting that, with financial analysts getting their books prepared to even present that to an investment bank, because as you go to do that, bake off, as you call it, is like the perfect words.
00:25:22:15 - 00:25:46:14
Todd Sullivan
You want to be presenting, you know, the best sellable company as well. So getting your ducks in a row clearly hugely important. And then having this bake off rate with industry, specialized investment banking groups. But actual industry specialized investment bankers. Right. That is really, really key. And that is no small task. Right? That that's essentially what we do.
00:25:46:14 - 00:26:11:01
Todd Sullivan
We vet hundreds and hundreds of individual investment bankers in order to have a bake off for every founder. So, you know, when you're going in, you know where valuation expectations is. Everybody's on the same page. You know, the the the buyer lists the relationships that they have. That's hugely important. And then to get Jeffrey is I've got to give a shout out to Storm Duncan at Jefferies.
00:26:11:09 - 00:26:31:15
Todd Sullivan
He's no longer at Jefferies. He's just left to start his own firm. But one of our, you know, top, top investment bankers on the technology side and really understands Web3 and, you know, a variety of things. And he's been a top guy for 13 years at Jefferies. So and an incredible firm. So you're very fortunate to have a group like that representing you.
00:26:31:23 - 00:26:43:04
Todd Sullivan
All right. So you've got the team and they're kicking it off. Can you tell me talk to me through the process. Was it just going after CBS at that point, or was Jefferies saying, let's spin up some competition?
00:26:43:17 - 00:27:10:17
Andy Beal
So. Exactly. So Jefferies went out and, you know, we had some warm leads for them, but, you know, it was great about hiring a company like Jefferies. And their media specialty was that they knew the key players as well or better than we did. And, you know, they were able to basically, you know, determine whether or not what CBS was proposing was, you know, the right deal for us.
00:27:10:18 - 00:27:53:20
Andy Beal
And so ultimately what happened is that we established a a price range and went into an LOI with with CBS. The price range was rather broad. And then depending upon how the diligence process went, would basically help CBS find the value point. And that that worked out quite well. And because our books were clean and because, you know, we we had everything that they were seeking within the scope of the the data room that we had set up, they came back to us and said, we're the cleanest company that they never, you know, really looked into and and grateful for that compliment.
00:27:54:10 - 00:28:25:15
Andy Beal
But, you know, that was thanks to Sal and also the investment banking team of Jefferies to help us get there. And then it came down to, you know, a final negotiation, which was between being enjoy high dollar and it was far more like a car deal than I expected. And he said, I'll I'll I'll pay you X. Say, well I'll take X plus five And when that had held back and forth and that the middle of I of that at the very high end of the range very close to the high the range.
00:28:25:15 - 00:28:26:21
Andy Beal
So we're pretty quick.
00:28:27:07 - 00:28:50:10
Todd Sullivan
Andy That's awesome. There's a lot for for me to unpack there. So I think, you know, when you get an LOI, write a letter of intent with a big range like that, you have to really rely on your investment banking group to say yes, this is the right acquirer to go down this path with. And the fact that you got CBS, they're not playing games.
00:28:50:10 - 00:29:20:23
Todd Sullivan
They're not going to throw a big range and then look for every reason to drop you down to the bottom of that range. So you got you know, you got an honest quality, highly experienced acquirer, but then you also got Jefferies in your board setting you up to end up at the top of that range right there is I want to go back to one thing that you said, which was the fees for Jefferies to be on your team are going to be expensive, but we always tell our founders, do not focus on the fees, focus on the outcome.
00:29:21:05 - 00:29:43:12
Todd Sullivan
And literally that preparation, those conversations and that they put you in and the way they helped set that LOI up, set you up for the top end of the range. And those are millions of dollars difference. And so founders really need to understand that it's not about the fees, it is about it is about the outcome. So but you it sounds like you were the one doing kind of the final negotiation.
00:29:43:12 - 00:29:57:01
Todd Sullivan
And and I guess that does happen. Right was we talked about price. Was there anything that was really, really important to you with with a buyer or that relationship and of going forward that that made you choose CBS?
00:29:58:08 - 00:30:26:06
Andy Beal
Yeah. So you know, their concept for what they wanted us for was important. But, you know, we where we are located physically is in a, a community that is that we're about 35, 40 miles outside of Sacramento were some semi-rural area. We probably yeah, at the time of the acquisition we may have been the largest and I'll say office business, you know, in our community.
00:30:26:14 - 00:30:52:10
Andy Beal
And so it's very important to me and the entire staff was were just local there young people that graduated from local high schools and go away to college and come back and look for jobs in our community. They're not that common. And so being able to keep Maxpreps in Alvarado County and our hometown was important to me, and we did negotiate around that as well.
00:30:53:04 - 00:31:16:14
Andy Beal
And it's interesting, you know, they didn't push back very hard on that. And it takes some time to figure it out. But, you know, we think about a company like CBS that had hundreds of radio stations across the country, hundreds of television stations, a fourth in terms of syndicated partners and an owned and operated station. So there wasn't a centralizing bulb in their body.
00:31:16:23 - 00:31:27:07
Andy Beal
So, I mean, the idea that I had to negotiate that was probably, you know, a much bigger deal for me than it was for them. You know, if is are very, very accustomed to having distributed operations.
00:31:27:15 - 00:31:36:20
Todd Sullivan
Got it. What about you personally? Right. This has been your baby to this point and you're you're a young guy. Like, what are you thinking about your personal career.
00:31:37:09 - 00:32:19:04
Andy Beal
And and that you're very nice, savvy young guy. I'm not. And when I sold Maxpreps, I was 49. Now, now that I'm 64, I look back and, you know, that's really young. But at the time or the 49, I'm nearing the, you know, the twilight of my career, you know, I love doing Maxpreps I was still coaching at the high school level and, you know, I love the rush of watching the audience numbers and, you know, Friday night were, you know, our highlights at a during the fall were our highlights for Maxpreps and I loved the rush of watching literally, you know millions of people a day, you know, coming to to our site.
00:32:19:09 - 00:32:45:00
Andy Beal
I enjoyed selling sponsorships and you know, and be an advocate for high school sports and corporate America in some respects as well. So there's a variety of things that I loved about Maxpreps. And I was by no means ready to move on to do something else. I was very satisfied to be able to stay with CBS be an executive at CBS and then run the high school operation for them.
00:32:46:01 - 00:33:11:03
Todd Sullivan
That's great. Yeah, I think, you know a lot of business owners, right? You're their identity can get tied into the business that they've built, right? It's their baby. That's how they relate to family, friends, business colleagues. And so, you know, to me, you structured an exit that allowed you to have substantial control, maintain where the business was, continue to run the business, just new ownership.
00:33:11:09 - 00:33:17:15
Todd Sullivan
Can you talk a little bit about how that changes you when you sell a business?
00:33:17:15 - 00:33:41:09
Andy Beal
Yeah. So, you know, that takes some degree of pressure off. I mean, there's new pressures, but not having to worry about whether or not you're going to be able to make payroll, You know, is these people that you're working with every day, they're they become your friends. A you know, they're the cities and, you know, making house payments and car payments and they have kids at home.
00:33:41:22 - 00:34:20:04
Andy Beal
And the pressure of knowing that you can actually make payroll each week or every other week was something that, oh, I was going on that pressure come off me. There are other things, you know, in terms of the day to day that changed. You know, having access to the corporate resources at CBS was something that was, you know, really useful as well in terms of being able to access, you know, H.R. professionals, finance professionals and and lawyers and not having to necessarily pay the freight, you know, from your own pocket in order to basically have a contract.
00:34:21:00 - 00:34:45:05
Andy Beal
So that that was useful within CBS. Then again, going back to just, yes, you want to perform for for the new owners, you want to make sure that you're continuing to do well, but that the level of pressure to make sure that you're hitting payroll and paying your bills is reduced, then when you're part of a bigger organization, I bet that's awesome.
00:34:45:05 - 00:35:12:00
Todd Sullivan
So. So but you stay there. You stay there for 13 years, right? And and you grew that business. I mean, I'm remembering some of the stats like ten X you're your audience. So when you look back at the sale of the business and how that was structured, do you feel like you structured it appropriately, given how much you grew it and not, you know, increasing costs is remarkable what happens once you end up in the CBS camp.
00:35:12:10 - 00:35:15:12
Todd Sullivan
So was it was it structured appropriately when you look back on it?
00:35:16:04 - 00:35:36:01
Andy Beal
Yes, I have no regrets. It's also the way that the deal was structured was what's fair. CBS followed through on everything they said they were going to do. And I was very satisfied to, you know, have MaxPreps inside of CBS.
00:35:36:08 - 00:35:57:10
Todd Sullivan
We do so many deals, right. And we do are investment bankers and our M&A teams do deals with kind of known quantities as well as, you know, new private equity firms, new family offices, new strategic partners. And I think one thing you can say about these companies that the CBS’sof the world is they have that reputation to uphold.
00:35:57:10 - 00:36:15:00
Todd Sullivan
Right? They have they do right by you. Right. Because they want you referring and deals. They want that reputation. So I feel like them in particular do a very good job from from an M&A perspective. And then you've got Jeffries right. If you want to see a Jefferies deal, which are going to be the best deals out there, you better play nicely.
00:36:15:10 - 00:36:44:19
Todd Sullivan
So I think, you know, for our founders to understand the intricacies of how it's not just contracts that create behavior, right? There are a lot of things at play. So it sounds like, you know, you had the right team, you had the right acquirer and everything, you know, lived up to his promise. That's fantastic. Can we jump into do you think was there any mistake, any mistake that you made during that M&A process before right know, right before you sold that you would go back and, you know, share with your fellow founders like don't make this mistake?
00:36:45:02 - 00:36:46:20
Todd Sullivan
Or do you think everything just went really well?
00:36:47:12 - 00:37:24:00
Andy Beal
I've made plenty of mistakes in my life, but I would say the process that led to the sale to CBS was the I was at my best during that process. And, you know, there were a number of moving parts we had, like I said, you know, some board members that wanted to move in a different direction, being able to keep the board together and keep them moving forward, keep the the diligence process going with CBS and getting it to the finish line or cross the finish was definitely the highlight of my career.
00:37:24:13 - 00:37:34:12
Andy Beal
And I don't think I made any serious mistakes during that process. Like I said, I've made, plus about that one year with pretty good.
00:37:35:06 - 00:37:44:14
Todd Sullivan
All right. So let's we're going to go into overtime here, right? We're sports guys, so I got to use that analogy. So who when you inked the deal, who was the first call? Who did you call first?
00:37:44:22 - 00:38:12:10
Andy Beal
I love my wife, definitely. And my wife's a businesswoman as well. And she's in real estate. And, you know, she'd just had deals that get to right to the finish line. Somebody pulls the plug on the deal over. Literally. She had a client die, you know, the day before an escrow was supposed to close. So, you know, she was always a little bit more skeptical than I was that it was going to get done.
00:38:12:18 - 00:38:18:01
Andy Beal
And so being able to let her know that it actually got done was was was pretty special.
00:38:18:16 - 00:38:47:23
Todd Sullivan
That's fantastic. I'm going to throw in one thing that time really does kill deals. So I'm sure she's seen her share of hardship in transactions. We have one closing tomorrow. Right. And there's always one little issue, one little last thing. And we've seen deals die eight days before signature is on a page with really nothing else to argue about other than COVID hits, the economy, changes, things outside of people's control.
00:38:47:23 - 00:39:00:22
Todd Sullivan
So founders really have to understand that you got to you got to move when it's time to move. So for next question, like who who did you celebrate with? Or really, how did you celebrate with team, family and any big celebrations?
00:39:01:08 - 00:39:26:06
Andy Beal
Yeah. So yeah, we went to New York and I brought my key players on my team with me back to New York and then we did celebrate with the CBS folks. They put on a very nice lunch and then they put on a very nice dinner as well. And so it was great to have the all my teammates there with me as we got to know the people we were going to be working with and were able to celebrate with them.
00:39:26:13 - 00:39:50:22
Andy Beal
And they were very, very welcoming at CBS as well. So that that helped make it special. Coming back to, you know, our hometown, you I certainly got to slap a lot of high fives around the office and and everyone was very, very happy with how how the process went And then new employment terms from CBS, which you know they got better insurance, they got stock options.
00:39:50:22 - 00:40:03:02
Andy Beal
There's a variety of things that made things better for them. And, oh, by the way, their options were paid out for MaxPreps. So, you know, people were, you know, coming to the parking lot with new cars and whatnot. So that was a lot of fun.
00:40:03:13 - 00:40:15:12
Todd Sullivan
That's great. And you kept their jobs where they were, right? That was obviously a big part of this for you. So how did you did you reward yourself personally, any vacation, car, like any any trophy?
00:40:16:03 - 00:40:35:23
Andy Beal
Yeah, Yeah, certainly. And you know that year took the family to Hawaii and and we ended up bigger than we would have done in the past. We and we headed off our home. Yeah. You know, so we'd been, you know, debt free ever since. And that's a position we like.
00:40:37:03 - 00:40:53:14
Todd Sullivan
That's a great feel we have We have one founder that says, Oh, I took my family to Disney World. I'm like, Oh yeah, it's like, like winning in the Super Bowl. He's like, No, no. When I say my family, I mean everybody. We know his family. I took everyone to Disney World, which is great. All right. So last two questions.
00:40:53:14 - 00:41:00:20
Todd Sullivan
Any advice you want to give to our fellow founders around selling a company?
00:41:00:20 - 00:41:32:03
Andy Beal
You know, I think, you know, I had not done that before. And so having the professional investors on your board of directors is was critically important. And then not they can be hard. They can force you to do things that or encourage you to do things that you may not feel comfortable doing. But at the end, at least in our case, that it paid off to have that and to do those things that they recommended, they have made us a more attractive company.
00:41:32:15 - 00:41:35:02
Andy Beal
And then, you know, it led to a great outcome.
00:41:36:07 - 00:41:45:02
Todd Sullivan
Okay, fantastic. And then the last thing is there, one person who'd you'd like to thank that really contributed to your personal and professional success over your life.
00:41:46:02 - 00:42:12:00
Andy Beal
I want to say my dad and I, when I say that, you know, I think, well, why? And now one of the things that my dad did was he instilled in me that he believed it and he believed I could do things and that he was not the only. And through that, the course of my career, I've had people, you know, tell me that they believe in me and I don't want to let them down.
00:42:12:08 - 00:42:32:11
Andy Beal
And some of the people that have told me that they believe in me the most fearless do with words, but they did it with their checkbooks. So those investors, those private investors that put money into Maxpreps or the the preceding corporate name that we had, those people believed in me. And it was very, very important for me not to let them down.
00:42:33:02 - 00:43:01:13
Andy Beal
And, Todd, conversely, you know, there are some people that basically said, I don't believe in you. I had one investor that basically wrote a check and a week later got cold feet, wanted their money back and he desperately wanted that money back. And he was rude about trying to get it back. And, you know, he clearly didn't believe and that was motivating as well to have somebody say, I don't believe in you.
00:43:01:21 - 00:43:11:13
Andy Beal
And it was something that I wanted to prove that guy wrong. And so I don't know, belief on both sides can be, at least for me, a big motivator.
00:43:12:10 - 00:43:30:07
Todd Sullivan
That's great. Thank you, Andy. Well, look, this has been a real pleasure for me. Like, you know, I said at the beginning, we've known each other a long time. I think, you know, I consider our professional relationship a big part of the success that I've had as well. So, Andy, thank you for telling this story. I know a lot of people are going to get a lot out of it.
00:43:30:11 - 00:43:30:23
Todd Sullivan
Thank you.
00:43:31:17 - 00:43:34:03
Andy Beal
Todd, it’s been a pleasure. Thank you so much for having me on.
Todd Sullivan
Thanks again for listening to the Cashing Out podcast. For more founder exit stories, please subscribe to the Cashing Out podcast on Apple, iTunes, Spotify, or wherever you listen to your favorite podcasts. And please remember exercise dot com and the Cashing Out podcast are for entertainment purposes only. This should not be relied upon as the basis for investment decisions.